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Re: General business questions

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Right on ! 

One of the best opinions on the subject.

Juan C.Gray

Rhkratzse(--nospam--at) wrote:
> Think of engineering practice as selling coffee:  It used to cost a dime (I
> hear) for a cup; now it's a dollar--or you can pay 2, 3 times that much at
> Starbucks for something special...or half that at Safeway (and wait in line
> for 15 minutes to pay for it).  Take your choice.  You pretty much get what
> you pay for.
> Supply and Demand.  If someone wants it more urgently they'll pay more for it.
> If it's of higher quality, or scarce, it costs more.  You don't care how much
> the person making the coffee gets paid--you just want a good cup at a fair
> price, when you want it.  The price has to pay for everything that went into
> the cup, including profit.  If you get it too cheap pretty soon they won't be
> able to hire anyone to make it for you and resources will go elsewhere--into
> making ice cream maybe.
> Does your client care about anything beyond getting a proper (or maybe just
> adequate, or maybe just stamped!) job at a fair price.  Does s/he care if you
> do it in one hour (using programs you've spent untold years developing) @
> $1000, or in 100 hrs. @ $10?
> I've estimated project fees in many ways (per hour/task/sheet/week) and it all
> comes down to finding that magic number that you and your client can agree on.
> How you arrive at it is irrelevant.
> Don't you think you should get paid for the time you spend on a
> job--regardless of whether you are calculating, drawing, filing, or driving?
> How much do you bill for that brainstorm in the middle of the night or in the
> shower?  Don't you think that you are billing at a lower rate than a
> similarly-qualified person in a large firm with a large support staff, and
> therefore your lower rate for engineering tends to offset your (supposedly)
> higher rate for clerical tasks.  (I am not convinced that there is much saving
> in having someone do clerical tasks at 1/4 your rate if you have to train
> them, supervise them, review their work, and at least occasionally reject it
> and redo it yourself.)
> You said you made a "tiny" profit last year.  Unless you're the Ford Fdn. you
> have to make a living wage, which some of us would like to think is at least
> equal to a garbage collector's.  (A decade or so ago I learned that at $30k I
> was making half of a NYC garbage collector's wage!)
> I urge you to not get lost in the details; keep your eye on the big picture:
> your total fee for a project v. the worth of your services.  I don't charge
> for copies, mileage (except long-distance travel costs), photos (except
> special presentation work), etc., because it's not worth the time to track and
> bill them.
> Sure, if you're learning-while-you-earn on a particular project you might want
> to adjust your hours for the time spend researching/learning UNLESS the
> alternative for your client would be to hire Ove Arup at (presumably) higher
> rates to get someone who already has that knowledge at their fingertips (we
> assume).
> Why do people come to a sole proprietor for engineering?  Because they're on
> the cutting edge of technology?  Because they have vast resources available to
> research/document/CAD/manage?  Or because they get personal attention at a
> reasonable (probably significantly lower) rate.  Don't forget that--you have
> something with an advantage over the 500-person firms.
> If you don't eat time on your run-of-the-mill jobs you're in an enviable
> position.  Ask yourself what your clients would do if you quoted them 30% high
> fees.  Some might leave, but I suspect many would still be quite happy with
> you.
> Hire someone?  Think that through very carefully.  Training time,
> administration time, taxes, supervision...  It's a big step and not for
> everyone.  Some of us are reasonably happy doing it all ourselves, even if
> sometimes we'd love to have an extra pair of hands to do the copying, or
> another brain to pick.
> Good luck.  I'm very interested in others' responses to your questions.
> Ralph Hueston Kratz, S.E.
> 510-236-6668  fax 510-215-2430
> Richmond CA